Crystallizing Value Creation & Market Overview
Valuation Considerations Normalizing for Historically Low Treasury Yields
REALTY INCOME
Historically, O's equity valuation
spread has normalized following
periods of economic uncertainty...
European sovereign
600 bps debt crisis
450 bps
300 bps
442 bps
150 bps
2011
302 bps
300 bps
200 bps
100 bps
2012
Fiscal cliff uncertainties
420 bps
2013
HISTORICAL NTM AFFO YIELD SPREAD VS 10 YEAR US TREASURY
2014
30 Day Moving Average
Economic slowdown in
China, Fed tightening
393 bps
2015
COVID-19 crisis
Current spread is ~1.0x
standard deviation wide
of historical relationship
Median = 331 bps
2016
2017
2018
2019
590 bps
386 bps
2020
In order for O's AFFO yield spread to normalize to its historical median, annual AFFO would have to decline to $3.42, a 14% decline relative to the midpoint of O's 2022 AFFO/sh guidance (1).
0 bps
Oct 11
Oct 12
As of 10/29/2021. Source: Bloomberg.
Bond market bifurcation: Realty Income
spreads near pre-pandemic lows (2) ...
Oct 13
256 bps
Rated A3 by Moody's Rated A- by S&P
68 bps
A3/A- credit ratings supported low cost of debt capital
2021
75 bps
Oct 14
Oct 15
Oct 16
Oct 17
Oct 18
Oct 19
Oct 20
Oct 21
(1) Assuming 10y UST yield of 1.50%, $71 stock price, and 2022 AFFO/sh guidance range of $3.84-$3.97.
(2) Represents estimated G-spreads on Realty Income benchmark 10-year unsecured notes outstanding.
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